SIM Report: Southeast Asia, Issue 9

VIETNAM: NETFLIX APPEASE VIETNAMESE AUTHORITIES ON TAX DEMANDS; FOREIGN BUSINESSES LIKELY TO BE SUBJECT TO FURTHER SCRUTINY AND TIGHTENING OF MEASURES

Minister of Information and Communications Nguyen Manh Hung on Tuesday (10 November) accused foreign streaming services such as Apple and Netflix of having so far earned combined revenues of almost VND1 trillion (USD43 million) without ever having paid any taxes in Vietnam. Hung said that this caused unfair competition with local firms, which are obliged to follow  rules on content and tax. The minister identified some content on Netflix as allegedly violating Vietnam’s rules on graphic and sexual imagery, as well as the country’s history and sovereignty. Hung also said that the government was in the midst of easing tax collection by calculating foreign streaming businesses’ revenues in Vietnam since market entry. Netflix on Wednesday (11 November) responded by saying it complies with Vietnamese law and was prepared to pay taxes in Vietnam, and that talks with authorities are currently under way.

The development continues a trend of increased tax demands and scrutiny for foreign companies in Vietnam, especially technology firms. Vietnamese authorities in January 2020 fined two major foreign beverage firms, Dutch brewer Heineken Vietnam Brewery and US firm Coca Cola Vietnam VND912.7 billion (USD39.7 million) and VND821.4 bn, respectively, in back taxes and fines. The fines notably came after authorities in 2019 revealed that thousands of foreign-invested enterprises were failing to abide by tax rules. Additionally, Vietnam’s 2018 Cybersecurity Law stipulates that all foreign businesses operating in the country need to store their data locally. The minister’s criticism notably comes against the backdrop of economic pressures and the potential for associated unrest generated by the COVID-19 pandemic, which is likely to lead to increased financial demands levelled at foreign businesses – particularly those viewed as profiting during the pandemic – as well as punitive measures potentially including greater fines for violators or blocking in-country access to firms’ online services. Access to Facebook, for instance, has previously been reportedly suspended amid usage of the platform to organise protests.

Foreign firms are more likely to be targeted in order to offset alleged tax losses from local firms. A report by the Vietnam Chamber of Commerce released in December 2019 estimated that 30 per cent of local businesses in 2018 bribed tax officials in exchange for not acting against breaches or to ignore or lower fines. The development also echoes a similar recent move against Netflix relating to politically sensitive content in India, with numerous Indians calling for boycotts of the firm. Other technology firms are being targeted by Vietnamese authorities; Vietnam is threatening to ban Facebook if it does not comply with increased content restrictions, according to Reuters news agency. Overall, moves to pressure foreign businesses to comply with censorship requests likely also reflect increasing nationalism and sensitivity towards perceived attacks on countries’ identities. The importance of the intactness of national image has likely become more important as a rallying cry amid economic damages inflicted by the pandemic. The Vietnamese government’s moves against Netflix demonstrate how streaming services and other content providers can benefit from factoring local sensitivities into their content moderation policies.  They also underscore the threats that a failure to comply with local cyber and tax regulations can pose. Censorship risks are likely to increase ahead of the ruling party’s five-yearly congress, the 13th National Party Congress, planned for January 2021.

WANT TO READ MORE ANALYSIS IN THIS LATEST SIM EDITION...

SINGAPORE: Further piracy incidents in Singapore Strait likely amid COVID-19 pandemic increase in maritime risks